Frequently Used Economic Terms for Lesson Plans

written by: Noreen Gunnell
• edited by: SForsyth
• updated: 1/17/2012

This article is meant as a companion to the other articles in this series on the economic crisis. It defines many financial terms and can also be used as a reference tool for lesson plans on the financial crisis included in this series.

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Understanding the economic crisis is a daunting task, even for people who are financially literate.For middle school and high school teachers, it is a challenging topic that can come up in class discussions during almost every subject - even if it is not being taught as part of a unit.

This article is meant as a companion to the other articles in this series, but can also be used as a reference for teachers and homeschoolers trying to explain the financial crisis and important economic terms to their students.

Bear marketThe opposite of a Bull market; a downward trend lasting two or more months.

DJIAThe Dow Jones Industrial Average or the Dow. It is the average price of 30 industrial stocks traded on the New York Stock Exchange.

NASDAQSystem that deals with the pricing of over-the-counter (OTC) stocks.OTC basically means that the financial instrument is not being traded on a traditional exchange such as the NYSE.

Prime rateThe rate banks charge to lend money to their best or prime customers. Find the current prime rate here.

LIBORThe London Interbank Offered Rate. It is the rate at which creditworthy banks in the London market can borrow short-term funds from one another.

Real IncomeThe buying power of an individual’s, nation’s, or corporation’s income.It is actual income adjusted for the prices of goods and services. An increase in income must be equal to or greater than any increase in price in order for real income to remain the same or grow.

RecessionThe nation’s economic growth is measured by the Gross Domestic Product (GDP).Two consecutive quarters of a negative GDP indicates a recession and is felt across the board through higher unemployment, reduced retail sales and lower real income.

DepressionA prolonged period of time in which supply exceeds demand.It involves increased unemployment and declining prices.

DerivativeA financial instrument that derives its value from an underlying asset. An option to buy stock, or call option, in Company X at $100 is a derivative. The value of Company X’s stock is the underlying asset.

Understanding the Financial Crisis

This series will discuss financial crises and financial market bubbles and crashes. The articles contain lesson plans that culminate with the class divided into four groups representing four stock market crashes; each group will write a skit about a person who loses money during their crash.